Season 1 Episode 4
December 12, 2019

[Step by Step] What is Private Equity and When Do I Need It?

Welcome to Step by Step, a 5-part series from Future Commerce to help walk you through how to launch and grow a successful business. This season, we're talking about funding. Today is episode 4. Today, Phillip & Brian are joined by Jeremy Muras of Lion Capital Group to discuss Private Equity.

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Welcome to Step by Step, a 5-part series from Future Commerce to help walk you through how to launch and grow a successful business. This season, we're talking about funding. Today is episode 4. Today, Phillip & Brian are joined by Jeremy Muras of Lion Capital Group to discuss Private Equity.

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Show Notes

Main Takeaways:

  • In today's episode, Brian and Phillip are joined by Jeremy Muras from Lion Capital to talk about the ins and outs of private equity.
  • What are some of the major differences between Private Equity and Venture Capital?
  • Private Equity benefits brands with not only large amounts of capital but a proven track record of successfully growing brands.
  • How can Private Equity help brands resonate with their ideal customers and tap into previously unexplored channels?

Jeremy's Journey: A Look Into His History:

  • Jeremy has been in the digital industry since the early 2000s and got interested when he was located in Hong Kong and he got close with the team that built
  • He worked for a luxury lingerie company called Agent Provocateur, ran for a brief spell, and then made his way to Burberry where he worked as the eCommerce Manager for Europe.
  • While at Burberry, Jeremy and his journey were the first to execute purchasing directly from the runway, in-store pickup, and various othering pioneering innovations.
  • From there, he found his way to Lion Capital where he operates as an expert on digital marketing and allowed him to expand his expertise.

Distinct Differences: Private Equity vs. Venture Capital:

  • Essentially, private equity is equity or shares that represent ownership or an interest in a particular company that is not public.
  • Private Equity requires companies to prove that they can scale and be able to demonstrate a number of years of profitability.
  • Part of the challenge that Private Equity firms face in today's ecosystems is that a lot of successful DNVBs have exponential growth, but haven't demonstrated consistent years of profitability.
  • Lion Capital typically invests over $100 million into a business and tends to not go much go lower than that.
  • The goal is to achieve a positive return on investment in 5-7 years.

Going Deeper: How Does It Work?:

  • Private Equity firms typically get their money from large institutional investors such as pension funds, insurance companies, and banks or other accredited investors like high-value individuals.
  • Large institutions are investing in what is effectively betting on entrepreneurship being a growing portion of economic advantage in the United States.
  • Unlike Venture Capital, Private Equity is not going to make risky investments that have not proven themselves.
  • The gates that brands need to get through to acquire private equity are designed to give confidence and assurance to investors that their investment will be profitable.

Hands-On or Hands-Off: How Involved Are Investors?:

  • Jeremy mentions that the consensus is split pretty evenly amongst investors whether they want to be hands-on in scaling their investment or not.
  • As the industry has become more competitive, the active investor has started to take dominance in the preferred model of a firm.
  • Demands are higher with the disruption coming from digital and other verticals.
  • Brands can factor in the level of involvement that they want from their investors when it comes to choosing the right fit.

When to Seek Private Equity: When is the Right Time?:

  • At what point in the lifecycle of a business does a private equity firm become involved?
  • Lion Capital typically becomes engaged with businesses that are in the growth stage of their lifecycle because they need to see years of data proving success yet also need room to grow.
  • Extending companies into new areas or diverse verticals are also good signs for Private Equity because that is something that capital could assist with accomplishing.
  • In the United States, a lot of brands are exclusively national and have not gone international yet, which is a prime goal that private equity can accomplish.

Broadening Horizons: Expanding Into New Territories:

  • There are a lot of companies that never break out of their verticals because they do not have the capital or the expertise to pursue new markets.
  • A product does not necessarily become a brand without guidance and funding.
  • Lion Capital looks for a brand within a category that is niche that can then be blown up in regards to growth.
  • The qualities and endorsements of smaller brands can reach wider audiences with the appropriate injection of capital.

The Work of the Investor: What's the Deal Flow?:

  • Deal flow is a term to describe the rate at which business proposals and investment pitches are being received and is imperative for Private Equity firms to maintain.
  • Firms have large amounts of capital that they need to employ, and if they do not have an adequate deal flow, then you will fail in distributing the funds.
  • It's becoming harder and harder to compete for deals amongst investors because of the high level of current business evaluations.
  • Sourcing deals through non-traditional means is how firms are competing in today's economy.

The Secret Sauce: What Private Equity Brings to the Table:

  • A huge differentiator between what Private Equity and Venture Capital bring to the table is that Private Equity brings with it a huge set of experience and skills that has a proven track record of building successful brands.
  • Operating is difficult and you need to scale within your operating function to really add value.
  • You need to make a decision whether you are prepared to invest to scale internally or if you want to build out a center of operational excellence that covers key aspects of your business.
  • The reason you bring in an active investor is to embrace what they offer and to trust their expertise and guidance when it comes to scaling your brand.

Getting Hands-On: Planning and Guidance:

  • Private Equity needs to be involved with strategic planning and budgeting because they have to account for their bottom line.
  • Lion tries to bring founders along for the growth journey, and while they would like to keep management teams intact, firms have access to a large network of talented executives that can take the brand to the next level.
  • There are different definitions of value, so sometimes strategic planning choices can be different than what a founder initially tries to accomplish.
  • Firms have to be very clear with their intentions and cannot take footing away from the founders because that relationship is what the initial agreement was based upon.

The Brand Journey: Potential Changes for Exponential Growth:

  • Moving a brand away from its traditional way of expressing itself towards new channels where new storytelling can resonate with customers is the goal.
  • Brands stay a constant throughout their lifetimes, but their messaging and values can potentially change along the way.
  • AllSaints has tapped into the zeitgeist of its customers and has made its message resonate amongst them.
  • Private Equity firms can provide a window for brands to see beyond their traditional messaging and discover ways to truly make the brand shine.

Brands Mentioned In This Episode:

As always: We want to hear what our listeners think! What are some specific ways that Private Equity can take your brand to the next level that are different from how Venture Capital would help your brand?

Have any questions or comments about the show? Let us know on, or reach out to us on Twitter, Facebook, Instagram, or LinkedIn. We love hearing from our listeners!

Retail Tech is moving fast, but Future Commerce is moving faster.

Phillip: [00:00:21] Hi there. Welcome back to Step by Step, a five part series from Future Commerce. In this series, we are walking you through everything that you need to know to launch and grow your successful retail business. In Step by Step Season 1, we're talking all about funding. And if you're jumping in midway through, I highly suggest that you go back and listen to this series from the very beginning. This is episode four of a five part series. And today we're diving into the topic of private equity. Brian, who's up on deck today?

Brian: [00:00:48] Today we have Jeremy Muras from Lion Capital. Jeremy is an industry pro who built up Burberry's e-commerce practice and grew it from zero to one of the most prolific e-commerce practices in the world. I learned so much from Jeremy on this episode, and I'm so excited to hear about his insight into the world of private equity. I bet you're tired of hearing about venture capital. Time for a little private equity talk.

Phillip: [00:01:14] And what's interesting about private equity that I'm sure you'll learn from this episode is that it's actually a lot more like sunshine and rainbows than you might think. Every time I heard of private equity prior to this, I thought, oh, they're just gonna come in and kick out the original leadership and dilute what a brand actually means. There are actually a lot of really interesting success stories that Jeremy dives into. And specifically those that he's worked with at Lion Capital. So I'm really excited for this interview. All right. Sit back, relax. Pull up a chair. Get ready, because we're gonna hear from Jeremy Muras about everything you need to know in the world of private equity.

Jeremy: [00:01:51] Hi, guys. Thanks for having me. Well, I've got a date myself straight away. I've been doing digital since the early 2000s, so I'm not a veteran, quite, but I've been around for long enough. I started to... I kind of got interested in all of this when I was in Hong Kong, and I became very close to the team that's building out, which was in the early days of recruitment out in Hong Kong and recognized the potential. And so when I got back to the UK, I really focused in building up my understanding of e-commerce as it was then and digital marketing equally as it was then, before social media. And I started working in a company called Agent Provocateur, which was a high end lingerie business in the UK, quite small at the time, went through sort of meta unit growth in the midst of sort of Cool Britannia. And in the end was sold for a significant amount to a private equity company. Following that, I worked at Topshop, running for a brief spell before joining Burberry, where I started as the e-commerce manager for Europe, working a very small team of three people in an office on this lost mezzanine floor, where the toilet sort of leaked through the roof, with an executive team on the floor that I didn't know where it was. And they didn't know what we did. We didn't know what they did. But, you know, we sold the twelve orders coming through on day one, and we built that business to $145 million globally over eight years during the time I was there.

Brian: [00:03:23] Wow.

Jeremy: [00:03:24] So it was an exciting time. I can't take all the credit. There were a whole bunch of very bright people, and in particular Angela Ahrendts vision to really position digital and then e-commerce at sort of the forefront of the business strategy. And we did a number of really interesting initiatives, things like shopping direct from the runway, which we were the first to really execute, really building our omni channel globally, which again I think buy in store, ship to your house, buy online and pick up in store... These types of initiatives we were pioneering, so in the luxury space and then more branded initiatives like bespoke and onto the trend. So it was a a time of exciting, exciting innovation, and I was very fortunately part of that. It led me then to a slight pivot. But kind of not really, having done then eight years at Burberry at the end, I was leading the global eco-business. So as I said, over $150/145 million. I decided it was time to leave and make a little change. And I had the opportunity through a good friend and colleague of mine, William Kim, who left to become the CEO of AllSaints, which is a Lion Capital company. I had the opportunity to move across and work in the PE space, and for a company called Lion Capital, as you nicely positioned at the beginning, a very much consumer focused PE firm which, at the time was quite unique. Obviously a number of people have moved into that space now. My role was threefold, really, one and the majority of the time really operating as a sort of an expert or operating partner around digital technology, marketing, brand. So that's kind of what drew me to it was quite broad, it was an opportunity to really stretch myself into some areas that perhaps I didn't have as much experience. And then obviously bring a lot of my sort of the heartland of my experience to bear across a broad sector, a broad selection of sectors. So not just in luxury fashion, but we have, I mean we do have fashion, so we have brands like AllSaints, as I mentioned... Brands like John Varvatos. Previously we've been both with Jimmy Choo and American Apparel. Currently, we have Alex and Ani, as a minority investor. Over here in the beauty space we have Perricone MD, which is a luxury skincare brand. We have Paige denim over here in LA. Lenny & Larry's, a protein cookie, vegan health protein cookie out in LA, again, which is doing quite well. In the UK, Grenade, a protein bar here in the UK. So we are really spread across consumer focused in on fashion, beauty, jewelry. And we have also got a background in hospitality and some fast casual dining. We owned Wagamama's at one point. So it's pretty broad, and it's given me a chance to really get involved in a number of different sectors. But as an operating partner, predominately, I'm also helping on the deal side, with the deal execs, in diligence and ensuring that we are asking the right questions and assessing businesses in the right way and projecting their growth and feeding into the value creation plan that we would put in place. I work with founders on that. And then the third part is really just internally being sort of a center of excellence for the firm, but also for the portfolio and doing things like, you know, webinars like this or podcasts like this. But also we have sort of a bi annual summit where we get everybody together. I try to work across portfolio in what I've coined "The Lion Capital of Digital Services," which is a sort of a network, a virtual network of consultants, vendors, partners who we sort of bring to bear across the portfolio and sort of leverage to ensure that we get the right services, the right cost, etc. So that's kind of what I do now. Is that enough of a brief introduction, or have I gone too long?

Brian: [00:07:49] That's amazing. Super interesting. So we've already had two different venture capital companies on the show to talk about how they're approaching their merchants and investments. I've already hearing some very distinct differences between venture and private equity. This is a bit of an explainify-er podcast. So maybe we could start with just a really basic question. Tell us about what private equity is and maybe just do a little by comparison to venture capital, just as a starting point for our listeners.

Jeremy: [00:08:22] Okay, I'll try to keep it as simple as possible. Essentially private equity, PE, is equity or shares representing ownership or an interest in a particular company, specifically that's not public. I think where this differs a little bit from VC is we require these companies to be a little bit more scale and to really be able to demonstrate a number of years of profitability. It gets hard for us and the models that we employ if that's not in place. And interestingly today, particularly look below these direct to consumer brands, a lot of them that we would be very interested in. That's kind of a part of the challenge that we've faced, even though they've seen hyper growth, it's often over a short period of time. And yeah, well, often they're not profitable. So to put that differently, if you like, it also gives our founders a source of investment capital and quite a large source of investment capital. So again, if you are in say, you know, you've been through VC and you're still in that growth phase, but you really see that there's opportunity to actually extend into different product categories, but you need to get significant investment then that's where we would help. Each investment varies in terms of size, depending on the strategy of the firm, and the size of the firm. We will typically invest over 100 million in a business. We tend not to go much smaller than that. And ultimately, for private equity, the motivation is a pursuit of achieving a positive return on investment over a period of time, and typically that's sort of five to seven years that we would typically hold a company before either selling it to another private equity company perhaps or taking it public. So in a nutshell, that's PE. Where do we get our money from? Typically, our money is from large institutional investors. Things like pension funds, insurance companies, banks, or other sort of accredited investors and those would be high net worth individuals. But unlike VC or sort of earlier stage, you're not going to have multiple investors. You'll have you know, typically we'll be... We particularly like to be majority investors. But typically some firms are so different. You may have a couple of minority investors. We were a minority in APG at the time. Yeah, so I mean, that's sort of the 101 overview of private equity.

Phillip: [00:11:32] There's sort of a recurring theme that I'll muse on here, and I don't know if you should or can give a reaction to this, but I find it interesting over this series, and learning about this for myself, how many different types of companies, both on the private equity and on the venture capital many of them are actually funded by pension and collegiate systems of education. How many of those sort of large institutions have some kind of money invested in what is effectively betting on entrepreneurship being a growing portion of economic advantage in the United States? And I find that really encouraging. Some might find it scary. I find it very encouraging that if anyone's betting on anything today in 2019, it's that they're betting on American ingenuity and entrepreneurship. And I think there are worse things to take bets on.

Jeremy: [00:12:42] Right.

Phillip: [00:12:43] In the world.

Jeremy: [00:12:43] Right. I couldn't agree more. I think the short answer is, a significant amount. Historically, PE firms have taken the bulk of their money from pension funds and LPs. And again, unlike venture capital, because as I mentioned earlier on, we aren't going to place a lot of super high risk bets on businesses that haven't proved themselves. We tend to be more conservative. Don't get me wrong, there's obviously still risk involved. But the process of diligence and the sort of the gates that need to be, you know, that brands need to get through are our aim to give confidence and security to our investors so that when we come to present the case to our investment committee, who ultimately are liable to go back to our investors, that they feel comfortable, that they can sit in front of their investors and defend that investment.

Brian: [00:13:48] So it's closer to like pulling out a loan than than, say, like venture capital, which, you know, people that go to venture capital would probably get left out of a bank. When someone comes to you, it's closer to applying for a very, very large loan. Obviously it's not a loan, but...

Jeremy: [00:14:04] In a way. And you're going to a bank that has got a credible track record in history that you trust, both in terms of the bank manager, the individuals that you're speaking to, but also their track record. So PE lives and dies on their success of prior funds and investments. And that's, I think, a very important part.

Phillip: [00:14:30] My sense is, though, that unlike a bank... My bank doesn't tend to get involved in the way that I run my business to make sure I can pay for my house. I get the sense that one of the value ads of private equity is that you can be very involved in the operations to help scale and grow your investment. How does that usually work?

Jeremy: [00:14:56] I think that's a really interesting point. And, you know, it gets... I think the industry is constantly considering and evolving in how they consider how involved to be. In short, it's broken. I mean, private equity does sort of split itself fairly down the middle and says, look, either we're going to be a passive investor or we're going to be an active investor. And I think increasingly that the active investor is becoming more of a popular type of structure for a PE firm as it's become much, much more competitive. You know, there's a lot of money out there. There's a lot of access to money. But investors are becoming more expensive. There are a number of reasons for that. And the demands on PE are becoming higher with competition, the destruction that we're seeing coming through from digital in other areas. And so, you know, if we are going to secure the good deals, I think founders are looking to their investors say, "Hey. Sure. Great. The investment is very welcome, and we need that." But in this ever increasingly complex environment that we're trying to trade in, if I can come to you and say, "Hey, I've got an operating team that can help you with your IT and technology, with your marketing and branding, with your digital supply chain, retail execution, and you can point to a series of experts who have been there and have done it before in, you know, high profile businesses, then I think that means a lot to businesses as they consider who to take investment from to grow the business.

Phillip: [00:16:55] You mentioned, you know who to take it from. Maybe we can sort of start at when to take it from whom. At what point in the sort of the stage of the lifecycle of a business are, you know, is a company like Lion Capital being engaged? And how are you getting engaged? Are you going to market trying to find these opportunities or do people come to you? Give us a little bit of insight into how that works.

Jeremy: [00:17:22] So, again, I think as I mentioned earlier, we're not VC. And PE and VC have traditionally been very different although this sort of growth funds with PE which are dropping down into sort of writing smaller checks, that's slightly smaller investments and not always majorities either. But if I could take our example, it's what I know best, we would typically look at businesses that are in sort of the growth stage of the lifecycle. You get some PE firms that are looking at more distressed assets. We're not one of those. We generally need to see, as I said, a number of years of historical data and profitability before investing. But then we look at say, you know, how can we maximize value of these brands? Is there an opportunity for us to take them into a new channel? Paige Denim would be a good example of that recently in our current fund where, you know, they built a fantastic business largely through wholesale, and we haven't really done much direct to consumer, either through physical retail or additional retail, so we saw an opportunity to really extend that and grow into that channel based on the strength of the brand, supply chain, and product, and reputation. So there are new channels. There is also the opportunity to... I suppose we want to look at them and say, can we extend in to other adjacent products that we could take this business into? So Lenny & Larrys, in terms of their product, they have have cookies. But, you know, we've already taken them into more snackable cookies. So rather, the big cookie that you see on the shelves, it's a small stack of cookies. You know, there're a number of different products that are coming through the innovation pipeline there that are going to utilize sort of the core values of the business, but maybe move away from just basic cookie. There is a lot more that we can do in that protein space. That's a huge one for us. And again, I think a great example would be Jimmy Choo, in the past where, you know, not only did we blow it up in terms of shoes, but moved into bags. I look at AllSaints. You know, we've done a lot moving their great leather, but it was all apparel. So we've launched shoes and bags, which has been great for us. So, you know, we're looking for businesses that have that potential to build out an into maybe the much larger entities. And of course, you know, another key thing, particularly here in the US, I think, which is certainly what I found very interesting coming over here, is that a lot of these brands, and these are big brands, but they're very either sometimes even regional, but certainly national and haven't really grown internationally. And now that's not easy to do, but one of the things that we bring is we have offices in London and in LA here where I am. But we've grown businesses. We've built businesses in Europe. And so we've got a strong position here toward US businesses. You know, we can take you to Europe. We could take these markets. We have the networks, whether it's licensing or whether it's direct, whatever it may be. We've been there, done it. We've got depth of experience in doing that. So international experience is important. And I think ultimately, if there's an opportunity, we have to see ultimately that there is a value plan in place, that we can see a return on that investment. And, you know, smarter guys than me will be molding that out to try and get us some sort of 2X return on that. And ultimately, that's kind of what we look for.

Phillip: [00:21:03] You mentioned category expansion. I had a little bit of a interesting spring this year. I shared a stage in emceed an event with Gary Vaynerchuk. And so he gave me a signed copy of his book, "Crushing It," which then I guess I was obligated to have to read. {laughter} In the book he was talking about Annie's, which Annie's is a consumer packaged goods brand here. I know they're available in the United States. I'm not sure what their international footprint is like. But they are very famous for organic macaroni and cheese. Where you might get a boxed macaroni and cheese, you know, from Kraft or somewhere else, but you may not love the ingredients that you read on the back of the label. And so if you're going to purchase, you know, that sort of food from that category, why wouldn't you purchase an organic variety? And it's interesting how they went from mac and cheese. It was never just about the mac and cheese. It's actually about organic comfort food and how they talk about this really strategic growth of category. And I find it interesting that that's one of the things that you reference as the kind of strategic approach to upscaling a business is, how to do that, when to do that, and how to execute it well. Because I'm sure there are companies that are wildly successful with, you know, an evergreen product, but they don't know how to take the product and make it into a brand.

Jeremy: [00:22:33] Absolutely. And Gary is as insightful as ever. I've heard him a number of times, and he also puts a lot of value on culture and people. And I think we look for that in our brands, in terms of leadership and the management teams. I think that's very important. But your point in terms of products and services, often we look for a category or a brand within a category that is niche and then it can be really blown out. Grenade, which is a UK based protein bar, was a perfect example of that. The protein bar category itself is pretty, pretty advanced. But they had built this great story working with the British military and had real credibility and, you know, in that sort of environment with something that actually tasted really great but just had no awareness. And so our ability to scale that out has seen huge growth of that brand and that product because it had just a quality that was slightly different and an endorsement that was slightly different that we thought had a... And that comes into the sort of storytelling behind these brands. They had a real story that we could tell. But you asked who? When we think about who we want to invest in. Like I said, ultimately at the end, it comes back to can we deliver a return for our investors? But I think it's also not only that product, that unique product and services, it's its reputation and its customer. And increasingly we are looking at a companies own data and a lot more tools around, you know, really understanding how the customer affinity to that brand and loyalty to that brand. And, you know, you've got to be careful looking too historically on that. But with the current data, you can get a pretty interesting picture, in terms of customer service and experience. And I think, you know, again, in this very competitive space, customer loyalty, brand loyalty is very, very, very important. And some of these growth brands have an immense, really interesting customer, and a lot of customers, but often they're not doing very much with that data. And so we sink in and see that there's a real opportunity to continue to build customer loyalty, but also build audience, and much wider audiences, based on our understanding of who their customer is, and bringing in some of the tools that we have to bear on that.

Brian: [00:25:18] I heard something kind of interesting that I feel like you've sort of been hinting at throughout this interview so far, which is you just said, you know, tools that we can bring to the table. And you mentioned edge that you bring and like a number of other things that sort of imply to me that there's actually quite a bit of competition among the good deals. That's another thing I heard you say. You know, you're looking to go after good deals. There's a bunch of PE out there that's going after sort of distressed brands. But I don't think anyone that's listening is necessarily. I mean, there may be some out there that are listening that are in that situation and do need advice there. But I really want to focus in on those brands that are in growth mode, the kinds of deals that you go after. I would imagine that there're quite a few companies... Like when these companies decide that they are going to take capital, there's probably quite a bit of competition for being their investor as they are a good brand.

Jeremy: [00:26:17] Right.

Brian: [00:26:19] So are you going out and looking for companies to invest in? Or are they looking for you? Which is happening more? And also maybe you have some advice for our merchant listeners that are potentially on the edge of getting PE. Do you have any good advice for them as they sort through this book of investors that they have to figure out, "Oh, wow, which one of these is the right fit for us?"" Any advice there?

Jeremy: [00:26:50] Yeah. You know, deal flow is probably, possibly, definitely, you know, one of the top three things that PE talks about. It's a constant. We have to have deal flow. We have large funds of capital that we need to deploy. And if you can't get the deal flow, then you will fail. I think at the moment... Probably if you talk to a real PE deal executive, he'll say more...  It's becoming harder and harder to find and compete for good deals for mid-sized PE firms such as ourselves and a whole bunch of us. There's been a proliferation of PE firms as well as it's become easier to raise capital, there is an abundance of cash that seems to be in the marketplace at the moment. What we're seeing is a very high multiples of valuations at the moment. I think, you know, the average is in the region of 11 times. That's a that's a significant valuation because you might be slightly lower than that. So to get into historically how you would do this, which is what we call an auction, which are banks touting and going to PE firms and saying, "Hey, look, we have this deal...showing presentations and submitting offers, and going through the whole process of whittling down to somebody who is then in a last one, two staging and invests a lot of money in diligence becomes increasingly difficult, certainly for us, trying to compete for the really good deals. So increasingly... And I think there's value in this Increasing it becomes more about sourcing deals through other means, having really good execs who have fantastic relationships and having a brand that attracts people to it vs. having to just have deal execs who are going through the motions, have relations with the bankers. It is the type of people you want. I think we call it rainmakers. You want people in your firm who have the relationships, so we go out and bring in these deals without having to go through the mechanics of an auction. But also, you have to have a reputation, a brand yourself that attracts people to you. And people come and seek you out. And that does happen as well through word of mouth, predominantly through CEOs and founders. It's a small, small environment, as you know. And so we do see that. So in short, we avoid auctions where we can. We rely on our really talented business development guys and our reputation as we look to bring in new deals. But it's getting increasingly difficult. There's a lot of competition out there. And we are really finding that we have to pay closer attention to staying in our lane. Maybe putting slightly bigger bets on sectors of businesses that we feel really confident that we can get comfort around because of our process. And, you know, pay attention to then actually really assessing what's required to be done. A lot that's through data and then putting people like myself and others into the field early, so that we can set the course, get the right buy in and, you know, move fast, which is ultimately where I think we feel that we add value into the corporate entities.

Brian: [00:31:05] You're saying you're the special sauce. You're the differentiator.

Jeremy: [00:31:09] I love that.

Brian: [00:31:09] {laughter} You're the thing that attracts people to... I mean, taking Burberry from nothing to 150 million dollars in online sales is quite the pull. I think this is a huge differentiator for the whole venture capital versus PE discussion, as well. Like Philip said earlier, you're bringing so much to the table. When someone comes and gets PE, they're taking on a set of experience and a set of relationships in this. And a biannual conference that they can go to and find more resources. Your value add is that you're the best at what you do.

Jeremy: [00:31:55] That's right kind of you to say that. I'll come on to the show any time if you keep buttering me up like that. {laughter} I think when I started maybe five years ago for Lion as a sort of a digital focused operator, you could count on one hand... I think I knew them all... There was about three of us who are doing that type of role. And I know that that has changed dramatically. I speak at some PE events, and I certainly get a lot of attention and a lot of people trying to understand, you know, should they be bringing somebody like me in? I always caution them a little bit. You know, operating is difficult. And I think, you know, really, you need some scale within your operating function, so that you can really add value. And I think there are some firms that have really invested in building out operations, operating teams. But they tend to be the bigger firms. And there're others who will get a person or a couple of people in, like us. And, you know, we add value and we help. And I'd like to think that we've benefited the brands of the portfolio significantly. But you still need to make a decision whether you are prepared to invest in capability internally and get the best, or whether you want to take more of a holding company approach and build out more of a sort of a center of operational excellence that covers some of the key criteria, whether that's technology, data, social media, digital marketing, you know, you name it. You pick a department.

Phillip: [00:33:48] Do you think that having the notoriety and sort of the, like you said, being a known entity in the world. Sort of a destination, right? Maybe some validation to have Lion capital take a stake in your company that you are worth taking a bet on as a brand. Do you find yourselves ever in a position, or how do you prevent yourself from being in a position, where they expect you to be more active and that's not really your role or where they expect you to be more passive and you prefer the opposite? Can you tell me a little bit about how you manage and how involved you are in the vision and execution for the brand?

Jeremy: [00:34:33] ,You know, every brand is different. That's the first thing to say. And I think it still surprises me that there is pushback in terms of what we can bring. And I don't understand that. I understand that people have built their businesses and have a lot of institutional knowledge in terms of how they've done that. But the reason really you bring in an investor, such as Lion Capital, who is openly an active investor, is to embrace what we offer. And I think maybe it's the more traditional ways that we help, you know, that's kind of best practice. And stuff like strategic planning or financial management I think is embraced fairly easily. You know, there's a slight dichotomy in terms of where we can help in investment, in infrastructure. You know, we kind of talk out both sides on that sometimes there. We're kind of like, "Oh, are we going to do all this? But hang on a second. How we gonna to pay for all of that?" And again, that's why as I look at platforms, that's why somebody like Shopify is very interesting to PE because there's not a massive outlay of capital required to put something in that you can really drive pretty effectively. But, you know, I think to answer your question... We find that more often than not, if we've put the right team in place with the founder and that there's a a good relationship there and it is a real coming together early on, in terms of setting out what the value creation plan is and really holding hands around that, it makes it... And introducing the sort of the operating team early in that process... And that's what the bigger PE firms tend to do is then really drive, from the PE perspective, having that board seat, you know, really building those relationships directly because we know how to talk to and deal with retailers. Then we find that more often than not, we are welcomed in. That said, there is a story that was told to me by this old dude in PE, when I started. He said to me, "One thing I can just give you as one piece of advice... Don't be a seagull." What do you mean "Don't be a seagull?" He said, "Don't go in, fly in, and shit all over it, and then fly out again." {laughter} You've got to build relationships, and you've got to build trust. And that's no different to how you would operate within a company, a brand. It just happens to be cross brand and cross portfolio. And that's where things like these value adds, things like getting everybody together and say, "Hey, we've got a bunch of brands that are similar in many respects, why don't I get out your way and create, you know, Slack channels and facilitate events for you to all learn from other people's mistakes and maybe share contacts, vendors, best practice?" and that type of thing. Those types of things, rather than going in and saying, "Hey, OK, how much money have you made this month?" tend to work much better in terms of building that trust and enabling us to have more of an input and practice some cross correcting along the way than it does to be too aggressive in terms of trying to set may take it the wrong way...we have certainly KPIs that we monitor and measure, but being too aggressive on that front.

Phillip: [00:38:26] I'm going to start telling you, Brian, from time to time be like, "Hey, you're seagulling me right now." {laughter} You need to back up..

Jeremy: [00:38:38] That's actually a fairly scary picture for me, in terms of what seagulling is. {laughter}

Phillip: [00:38:43] That's phenomenal.

Brian: [00:38:44] So I think what I hear you saying, also, is like you're to the point where you'll come in and you'll actually help one of your portfolio brands set their vision and their strategic direction. You'll do strategic planning with them. You'll get really, really, really hands on. I mean, are you even to the point where you're like replacing team members or making personnel decisions?

Phillip: [00:39:12] They would you never do that, Brian. That never happens in private equity. {laughter}

Jeremy: [00:39:17] No, no, no. There is no turnover at all. {laughter} It depends. I mean, we of course need to be involved in the strategic planning and the budgeting, because ultimately we have to account for a bottom line. But I think, you know, we are lighthearted about it, but it sort of raises an interesting conversation and brings to light some of the challenges that founders can experience with PE and things that can make the relationship a little bit more difficult. Ultimately, when you bring PE, particularly if it's a majority, as a founder... I mean, I can see. I'm not a fan of it. I can see. We like to bring founders along with us, really. That's first thing to say. It's very important to us, and we tend to like to keep them invested and have something really to work for, and play for, and get from the relationship. We aren't the type of firm that then just exits the founders straight away. We want to keep our founders. And as I said, we would like to keep management teams, and it's very important to us in assessing those management teams and assessing a business. If they've got strong management teams, that's a real tick in the box for us. But inevitably, one of the things, again, we can bring as a PE firm, is we have an incredibly long list of very talented senior execs that we can call upon, a network that enables us to quickly bring in people as they are required. And so we will assess that with the founder, but the founder ultimately does lose some management control and perhaps has a dilution of their ownership. And that can be difficult. And in terms of the strategic planning, you know, there'll be different definitions of value. I see this quite often. I mean, we can't get away from it. The PE view of value is we want to grow brands, but really it's about growing a good return on that investment. I've said that more than once. But the founders view on value may be more around brand value. I mean, certainly that is my experience. Angela famously said that we're just custodians. There is this brand for a moment in time, but it's about building the brand over a lifetime. And so that's a slightly different approach to it. So, you know, we have to be very close. We have to be very clear about how we're delivering that value of that period of time. We have to be careful not to take that fully away from the founders, because that's why we bought the business. They're the experts. They know their brand. They know how to grow it. And we just supplement that with some experience that we have, hopefully to ensure that everybody, you know, it's not without bumps in the road for sure, but to ensure that, you know, over the period of time when we reflect on it year on year, and then over the end of the period, that we've seen the growth that we hoped and that founders stood in place, and that's still a value add as we come to sell the company.

Phillip: [00:42:21] Really well said. I've always felt, as well, that over the lifetime of the growth of any company, the one thing that is durable and lasts for the lifetime of the brand is the brand itself. And any one person in an organization or team of people, you know, can be instrumental to the success and growth of the brand and at a point in its lifetime or its history. But you look at some brands that have stood the test of time, with hundreds of years even in the world, and still they remain. They can even outlast you and me. So I think that it's a super interesting when you talk about sort of the human side of where we fit into the equation and in bringing something like a brand to life and know what the role of PE or any one person's role might be and helping that survive, or even thrive.

Jeremy: [00:43:23] Right. I mean, there has to be a a brand there, and PE is not good at creating brands. Yeah. It's interesting. We I think we understand what people look for in brands. We're all consumers, but it's beyond that. We've got real experience in understanding that. But particularly today, when there are so many more channels, there's so much more competition, you've got all of these amazing brands that are coming up and, you know, speaking the language of the new consumer, often purpose driven and already adept at using all these new channels. When we look at some of our brands, they have brands, but that's what they need to really become better at. So it's interpreting the brands, moving the brand away from the traditional way of expressing itself to... You know that's what we had to do at Burberry. And really sort of beginning to tell its story in a way that resonates and through channels where people are engaging with that content. I think that all brands are grappling with that. It's hard to do it. We look at AllSaints. I think they've done it better than most despite, you know, fashion being quite challenged in that for traditional brands. Because they don't have a... Yet... We're working hard on it. You don't have sustainable angle, which seems to be a good starting point for a lot of brands today. And so where do you go? AllSaints was really smartly tapped into sort of this zeitgeist of their customer. They even knew their customer really well. And every young man or woman, I think, goes through an AllSaints period of their life where they're a little bit anti-establishment, and want to stick a finger up to somebody or other. And so we know how to get those guys. It's how we continue to retain them as they grow older that's important to us. So we use music for that. We use sort of street culture flat, and that's worked pretty well for us. But it's hard.

Brian: [00:45:41] Interesting. So I heard you say you're the stewards, you're sort of that the Denathors waiting for the Aragorn. {laughter} The way that you're protecting your companies is just sort of like, you're seeing new types of channels open up. You're seeing barriers of entry continue to fall. You're seeing up and coming brands that are building on new native channels. But what you're there for us to really help provide your brands a window into this and make sure that they have a strategy to compete and be ready for these up and coming new technologies and channels and methods of selling. Is that is that a fair point or a fair assessment?

[00:46:28] You just summarized perfectly a very, very difficult thing. Yes.

[00:46:34] But also, I think typically because we're investing in businesses that are larger and often have well-established, more traditional routes to market or have very solid products and supply chains, that we can leverage those things to ensure that, you know.

[00:47:02] Let's take John Paul Vadis, for example. They've got a bunch of stores which up as do all states. But look what we've done. It jumps to take it to take advantage of that and build out that really effective omni channel strategies that are meaning that we're using our sales associates to help customers when they get onto chat or get on the phone or we're trading experiences in store for when people come in to pick up their products or where, you know, you're seeing what product we have in a particular store. So we putting that to one side and, you know, so that when they come in and they will gain some whiskey and, you know, and enabling them to really at most. And so it that so we're taking advantage. A lot of our brands have those sorts of traditional aspects that, you know, that we then need to say, how do we use that to our advantage, as well as trying to open up these new channels.

[00:47:58] And considering how to work with people like, you know, Amazon and the party, tell us other marketplaces. And I try to understand, you know, the direction of travel, that consumer. And again, the advantage that I have and that some of us have at Lion is we're not in the every day running around, "the hair is on fire" figuring out how to how to just make. That day and what promotion we should run. We're able to sit back a little bit and, you know, I'm really thinking about that more strategically and bring back to are CEOs and founders and be sort of sounding boards for them as they think about how to duck their businesses.

[00:48:37] I feel like this has been a masterclass. I feel like we should be paying for this kind of information. I think this is a pay check, write checks in the mail. There's a lot of money in podcasting. I don't know if you know that.

[00:48:51] I the emerging markets and Lion Capital is the podcasting angle. You guys should check it out.

[00:48:59] We're going deeper. This was a podcast. My pension's wrapped up in podcasting.

[00:49:08] Who knew this? This has been just wonderful.

[00:49:12] Thank you so much, Jeremy, for all of your time. This has just been such a wonderful time. I'm I'm. I feel like this whole series has been a wonderful primer for all of us who are as sort of understanding this point in history where access to capital seems to be growing. I guess I would leave our audience with a question to you, Jeremy, which is it is is this is this a sort of a singular moment? Do you think that we're sort of the apex or is this is this as hot as the economy gets? Or do you think that we're just getting started in the world of retail and retail investment?

[00:49:51] I think we'll just get started. I I think it's going to continue. I think it's getting more complex. And I think in terms of the consumer is definitely facing its challenges right now. Nobody can deny that. And it's going through a ton of flux. But, you know, people aren't going to stop spending money. The routes to market are going to become more complex. Some of the innovation that's coming through is it's so exciting. Yes. The rate of the rate of change is just going to accelerate.

[00:50:24] Anybody on this whole idea would comfortably predict what the next five, 10 years looks like. We know it's going to look bright different to today. So, you know, you need to work with people who are already thinking about what that looks like. And I'm just thinking about how to get as markets in the ways we traditionally go to market. So I think I'll give you that. I think it's, you know. Yes, sure. You've got to, we've all got monthly targets to hit. But, you know, if you're not taking time out to think about what your business looks like in five, 10 years time and find the right partners to work with to get there, don't be, you know, innovation for innovation sake and, you know, shiny objects. I mean, real tangible changes to the way that consumers are behaving, that technology is advancing. You're not looking at that, then I think you're going to have a lot of trouble a few years down the road.

[00:51:15] That is what the show is all about. Yeah.

[00:51:20] As we've as we usually say, you know, Future Commerce doesn't exist to try to predict the future, but to give you insights for you to be able to shape your own future.

[00:51:31] And I think that we've done that here today. Thank you so much, Jeremy, for joining us. My pleasure. Thank you very much. Thank you. Thank you. Look forward to seeing you guys again.

[00:51:37] Cheers.

[00:51:39] Thanks for listening to step by step by Future Commerce. If you found step by step valuable or if you're looking for more information about funding your retail venture, drop us a line at hello at Future Commerce that AFM. Remember, you can subscribe to Future Commerce wherever podcasts are found and we'd like to extend a special thanks to Shopify Plus for making this series possible.

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